If the IRS can prove by clear and convincing evidence that a taxpayer willfully failed to report income, it is authorized to go beyond the statute of limitations (generally 3 years from the later of the date the original return was due or date the original tax returns was filed) to propose additional tax. Where the IRS can meet this burden of proof it could theoretically go back to all years that had unreported income related to the foreign account. The unreported income could be from previously unreported transactions (a previously unreported sale of foreign real estate for example) and for previously unreported dividends, interests and capital gains from the account.
The taxpayer would be required to disclose the full extent of previously unreported income to the IRS as part of the requirements to qualify for a voluntary disclosure. It would then be up to the IRS’s discretion as to how many years it would require amended returns for. The FBAR penalty apparently does not extend beyond a 6 year statute of limitations.
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How many tax returns will I amend for my FBAR filing? was last modified: October 20th, 2016 by Tax